More than 1.82 million boe/day, up 5.3 per cent on 2016. Record proceeds of €3.8 billion from net divestments. These are just some of the results achieved by Eni in 2017.
Our commitment to energy transition and combatting climate change.
Our successes in exploration continued throughout 2017: we discovered new resources amounting to 1.1 billion boe (1.82 million boe/day), the highest level in Eni’s entire history. These results are extremely encouraging, creating further scope for our Dual Exploration strategy; the advance monetisation of successes in exploration by selling off minority stakes. It was on this basis that we finalised strategic agreements to sell 25 per cent of Area 4 in Mozambique to ExxonMobil and 50 per cent of the assets under development in the Egyptian Zohr offshore field. The latter took place under three separate arrangements: with BP (10 per cent), Russian company Rosneft (30 per cent) and, more recently, with Mubadala Petroleum (10 per cent). Since 2013, our Dual Exploration Model has enabled us to monetise reserves worth $10.3 billion.
Letter to shareholders
Faced with a complex international energy scenario, we have made a gradual transition to an energy mix that offers a lower environmental impact. This was in response to the challenges set by the Paris Agreement on Climate Change (COP21) and the need to decarbonise the energy system. In these circumstances, natural gas offers oil companies the opportunity to reposition themselves strategically, given the smaller carbon footprint of natural gas and the possibility of integrating it with renewable sources in the generation of electricity. Eni’s carbon footprint reduction strategy has been boosted by our renewable energy development programme, with around 20 projects currently underway or near to a final investment decision (FID). Together, these will increase Eni’s power-generating capacity by roughly 250MW. In addition, we are involved in the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), the aim of which is to provide market operators with increasingly transparent information on the risks and opportunities associated with climate change. Our commitment to the fight against climate change has been recognised by the CDP (Carbon Disclosure Project), which has listed us as one of the major Oil & Gas companies in the Climate A List in 2016.
Combating climate change by scientific means is a priority for Eni. We are working to ramp up research and technological innovation in the energy sector, continuing our partnership with MIT and taking part in projects with the Low-Carbon Energy Center promoted by the MIT Energy Initiative. We have renewed our agreement with the Polytechnic University of Turin and have signed another with the Consorzio Interuniversitario Nazionale per la Scienza e Tecnologia dei Materiali (National Intervarsity Consortium for Materials Science and Technology/INSTM). In 2017, Eni’s financial commitment to scientific research and technological development amounted to €185 million, €72 million of which was invested in our decarbonization programme in areas such as energy transition, bio-refining, green chemicals, renewable sources of energy, emissions reduction and energy efficiency. Our production of biofuels topped 206,000 tonnes, 14 per cent up on the previous year, breaking our existing record.
We confirmed our commitment to renewables by opening our first production sites in Italy and Algeria, and developing further initiatives in Italy and abroad. We signed a co-operation agreement with General Electric and the Energy Ministry of Kazakhstan and a Memorandum of Understanding with the Egyptian Ministry of Electricity for the joint construction of new plants. Meanwhile, Project Italy aims to use brownfield sites to generate a total capacity of 220MWp.
Eni and various national institutions have joined forces in launching a training and employment programme offering students two options: a primary-level apprenticeship or a sandwich course (alternating periods of academic study and work experience). The objective is the same in either case: to enhance young people’s opportunities for accessing the world of work by improving their technical and professional skills. The Protocol of Understanding signed with the Ministries of Education (MIUR) and Labour (MLPS) confirms our strategy of working closely with training institutions, a strategy that already included high-level training courses in the Oil & Gas sector delivered in partnership with polytechnics and universities. In 2017, we stepped up our efforts, involving Italian high-school students in initiatives bringing together schools and businesses. During the 2016-17 academic year, 130 schools entered into work-experience agreements with Eni, while 180 young people were signed up for primary apprenticeships.
In 2017, we achieved excellent results that demonstrate how the process of radical change begun in 2014 has transformed Eni into a company able to create value, even in such difficult times as the past three years, when the oil industry has been under severe strain. In 2017, our adjusted operating profit more than doubled, to €5.8 billion, while we posted a net profit of €2.4 billion, following a loss in 2016, thanks to contributions from all our businesses. Our operational cash flow, net of advances received from our Egyptian partners to finance the Zohr development and other non-recurrent items, was a solid €10 billion, 25 per cent up on 2016, showing a surplus of approximately €2.4 billion in respect of net investment worth €7.6 billion. This surplus enabled us to cover more than 80 per cent of the total dividend of €2.9 billion in relation to a price for Brent crude of around $54/barrel; in other words, to ensure full coverage at a Brent crude price of $57/barrel, improving on management’s initial forecast of $60/barrel. Divestments during the financial year, net of the share price relating to repayments of capital expenditure, worked out at €3.8 billion, reducing the cash neutrality from a Brent price of $57/barrel (organic) to $39/barrel. At the end of 2017, the company was in a strong financial position, confirmed by a leverage level of 0.23, well below our ceiling figure of 0.30, despite three-and-a-half years of depressed prices and cash pay-outs of more than €11 billion in dividends over the same period.
|Net sales from operations||(€ million)||66,919||55,762||72,286|
|Operating profit (loss)||8,012||2,157||(3,076)|
|Adjusted operating profit (loss) (a)||5,803||2,315||4,486|
|Adjusted net profit (loss) (a) (b)||2,379||(340)||803|
|Net profit (loss) (b)||3,374||(1,051)||(7,952)|
|Net profit (loss) - discontinued operations (b)||0||(413)||(826)|
|Group net profit (loss)(b) (continuing and discontinued operations)||3,374||(1,464)||(8,778)|
|Net cash flow from operating activities||10,117||7,673||12,155|
|Net cash provided from operating activities before changes in working capital at replacement cost (a)||8,458||5,386||8,510|
|of which: exploration||442||417||566|
|development of hydrocarbon reserves||7,236||7,770||9,341|
|Dividend to Eni's shareholders pertaining to the year (c)||2,881||2,881||2,880|
|Cash dividend to Eni's shareholders||2,880||2,881||3,457|
|Total assets at year end||114,928||124,545||139,001|
|Shareholders' equity including non-controlling interests at year end||48,079||53,086||57,409|
|Net borrowings at year end||10,916||14,776||16,871|
|Net capital employed at year end||58,995||67,862||74,280|
|of which: Exploration & Production||49,801||57,910||53,968|
|Gas & Power||3,394||4,100||5,803|
|Refining & Marketing and Chemicals||7,440||6,981||6,986|
|Share price at year end||(€)||13.8||15.5||13.8|
|Weighted average number of shares outstanding||(million)||3,601.1||3,601.1||3,601.1|
|Market capitalization (d)||(€ billion)||50||56||50|
|(a) Non-GAAP measures.
(b) Attributable to Eni's shareholders.
(c) The amount of dividend for the year 2017 is based on the Board's proposal.
(d) Number of outstanding shares by reference price at year end.
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